How to Increase Rents without Increasing Vacancies
By Jacob Lundquist
Rent increases are a difficult subject. On the one hand, property managers want to make money and compensate for local taxes and other fees. On the other hand, residents do not want to have to pay more money, and often do not understand the reasons for increases. When owners decide on an increase, the decision ought to come after specific cost-benefit analysis that uses data on regional rents and relative tenant acceptance.
Whether or not an individual tenant will accept a rent increase without leaving generally depends on their happiness, dedication to the property, and interactions with maintenance or management staff.
- Does the resident turn rent in on time? If not, they’re already having problems and will likely leave if a rent increase occurs.
- Do they complain about the speed of maintenance or other management? If so, they’re probably unhappy enough to leave when rents increase.
- Do they keep their property clean? Residents that stay organized will usually be able to deal with rent changes easily.
- Does the tenant interact well with maintenance and property management staff? Do they interact well with other residents? A resident that likes their maintenance staff will want to stay, despite slight increases in rents.
- Has the tenant expressed worries regarding: safety, security, maintenance, etc.? If these concerns are not addressed, the tenant will often want to leave.
A resident’s likeliness to stay also depends on local, comparable rates. If the apartment block down the street costs hundreds of dollars less for the same room and amenities, tenants will likely just look elsewhere. Make sure your rents are at comparable rates based on neighborhood values. Consider questions regarding relative demand.
- Does your property match local rates? If not, does it include amenities that justify that higher rate?
- When was the last time rent was raised? Were they uniformly raised?
- What is your current vacancy rate? Does your property have higher-than-average demand?
- Can you increase rents only for specific units or unit-types with higher demand? For instance, if studio apartments are in high demand compared to other kinds, can you raise rents only for studios?
Part of resident’s responses to rent increases will also depend on the manner in which they are communicated. Professional, timely, and clear communication can go a long way in this regard. Let the tenant know, as early as possible, that the next year’s rate will increase. Include, if you wish, an FAQ sheet that explains exactly what is occurring and why. Personally established relations with residents, as mentioned above, will also make the news far easier to deliver.